Long-term wage stagnation and skyrocketing housing and transport costs are continuing to take their toll as the number of people claiming financial insolvency reaches a seven-year high.
New figures have shown that personal insolvencies have skyrocketed to 34,108 in the final quarter of 2018, up nearly 35 per cent on the previous quarter – the total number for the whole year was 115,299 according to the Insolvency Service, a figure up 16 per cent from 2017.
The latest statistics offer yet more evidence of struggling households drowning in debt. Earlier this month a TUC analysis found unsecured debt – which includes all debts except mortgages – had peaked at £15,400 per household, up £866 a year earlier.
Total unsecured debt jumped to £428bn in the third quarter of 2018, up 33 per cent from the same time period in 2008, when the total was only £286bn.
Commenting on the latest insolvency figures, Stuart Firth of the insolvency trade body R3 told the Guardian that individuals going bust was down to a rise in inflation coupled with depressed wages and a credit squeeze by the City regulator.
He added that a similar rise in retailers and “other consumer-facing businesses” running into financial trouble could be blamed on similar reasons – because people are spending most of their wages on transport and housing as prices rise, little is left to pump into the consumer economy because households simply don’t have the discretionary income to do so.
TUC General Secretary Frances O’Grady echoed this idea.
“Household debt is at crisis level,” she said. “Years of austerity and wage stagnation has pushed millions of families deep into the red.
“The government is skating on thin ice by relying on household debt to drive growth. A strong economy needs people spending wages, not credit cards and loans.
“Our economy is not working for workers,” O’Grady added. “They need stronger rights and bargaining powers. Trade unions should be allowed the freedom to enter every workplace to negotiate higher wages.”
The TUC said that the key drivers of the weak wage growth that’s underlying the growing personal debt crisis include a low minimum wage that’s failed to keep up with inflation; the government’s prioritising corporate tax cuts over public sector pay; workers’ lack of bargaining power; and low public investment amid austerity.
Unite Community national co-ordinator Liane Groves agreed.
“It’s no coincidence that personal insolvencies have risen in tandem with the weakest wage growth we’ve seen since Victorian times,” she said. “When struggling families are forced to turn to borrowing because they cannot afford basic necessities such as food and rent, it’s no surprise that personal debt has spiraled out of control.
“The massive role that the government has played through Universal Credit in plunging the most vulnerable even further into debt cannot be ignored either. Last year Unite Community conducted a survey of Universal Credit claimants and the results highlighted this link between government policy and personal debt.”
“Over three quarters of respondents said they had been put into or pushed further into debt by Universal Credit with some forced to use foodbanks to survive as well as having to borrow from friends and family. Shockingly 60 per cent of respondents said that they had been pushed into housing cost problems too.”
Liane urged members to use Unite’s trusted debt counselling services if they are struggling to manage their debt and to join Unite Community in the fight against Universal Credit.